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Ghana’s public finances are deteriorating very fast. At the root of the present difficulties is a fiscal policy characterized by weak domestic revenue mobilization and rapid expenditure growth driven by budgetary rigidities and new spending programs. This type of fiscal policy that has been pursued for nearly a decade now has produced huge deficits and a rapid debt build-up, causing a sharp and persistent increase in debt service spending which is currently weighing down the nation’s finances.

If there was any doubt about this fact before, there can be none now given recent developments concerning Ghana’s sovereign bonds and international investors’ assessment of the country’s creditworthiness. According to international investors, Ghana’s sovereign bond prices have fallen sharply since the turn of the year, recording the worst performance among emerging market bonds. Falling bond prices imply rising bond yields, which simply means investors are demanding higher interest rates to hold Ghana’s bonds or lend fresh money to the country. Thus, Ghana’s sovereign debt is “considered distressed”, with investors losing confidence in the government’s ability to restore the public finances to a stronger footing.